Pest control and security group Rentokil Initial has shocked investors with a warning annual profits will be substantially down on last year.

The East Grinstead group described trading in the first four months of this year as extremely disappointing and said steps to improve performance were taking longer than expected to filter through.

Shares in Rentokil, which fell heavily in the wake of a disappointing annual results announcement in February, tumbled another 18 per cent.

On top of the profits warning, Rentokil said it believed now was an opportune time for Sir Clive Thompson, the company's former long-time chief executive, to step down from his post as chairman. He will be replaced by Brian McGowan, previously deputy chairman.

The latest trading update said turnover from continuing operations increased three per cent in the first four months but profits were down 6.2 per cent.

The decline at the company's hygiene services division was as much as 10.2 per cent.

Rentokil said stiff competition, delays in achieving new business from its expanded sales force and the collapse of several major contracts, were to blame for the poor performance.

As a result, profits for this year would be substantially lower than both last year and the current market expectations.

The company added profits would be at least £350 million - compared with £396.8 million last time.

Chief executive James Wilde said: "We have had a poor start to the year but I am confident in our plan to continue to develop our four markets."

Rentokil, based in Felcourt, is one of the largest business services groups in the world, operating in four key markets: Hygiene, parcel delivery, security and facilities management.

Sir Clive was appointed a director in 1982 and was made chief executive the following year, a post he held for 20 years. He became chairman in May 2002.

The millionaire 59-year-old is also a chairman of Kleeneze, a past president of the Confederation of British Industry (CBI) and a former director of Sainsbury's, BAT Industries and Seeboard, among others.

Once know as "Mr 20 per cent" for his record of profits growth, he said the time for change had come "to help management respond to the long-term challenges of the current environment".

Mr McGowan, who is also 59, is a former chairman of retail group House of Fraser.

Thursday May 20, 2004